AI stocks have been in a bit of a slump lately, as investors turn to less expensive, more reasonably valuable stocks.
One area that continues to receive attention is Financial stocks. Interest rates are still high Producing a lot of net interest income; However, interest rates are falling and are expected to continue moving downward over the next two years. This would lead to more companies investing, more loans, and more mergers and acquisitions – all good things for financial companies.
the Two recent declines in federal interest rateswith interest rates expected to be cut for the third time this year on December 10 Accelerating an already strong M&A market. This is a good thing for big investment banks, in particular Goldman Sachs (NYSE: A).
Goldman Sachs is one of the largestIf not the largest investment bank in terms of the value of the deals it makes. It ranks second or third in other metrics, such as revenue and fees from investment banking, and number of deals.
But compared to its main competitors, JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE:MS), Goldman Sachs typically generates a higher percentage of its total revenue from investment banking than other major players. So, when investment banking is popular, as it is now, Goldman Sachs typically sees a bigger boost in profits, which pushes its stock price higher.
This year, Goldman Sachs shares outperformed its peers, An increase of about 46% since the beginning of the year. The M&A market, which is not slowing down, is a big reason.
“One of the most active years in history”
In the third quarter, supported by interest rate cuts, merger and acquisition activity rose, according to a report from Deloitte. In the United States, The value of the deal reached $598 billion, an increase of 56% from the second quarter. These deals were worth $598 billion More than a quarter in four years. The number of deals also increased, but only by 2%, indicating that the deals that were made were huge deals.
Goldman Sachs accounted for much of that, seeing total revenue increase 20% year over year in the third quarter. It was an increase in revenue Supported by a 42% increase in investment banking fees.
In a recent podcast, Stefan Feldjuis, head of Goldman Sachs’ global M&A business, said the pace of deals in the past three months rivals 2021, which was one of the busiest years for M&A on record.
“This year has become not only an active year, but one of the busiest years in history,” Veldjuis said.
Projections for 2026 indicate that M&A activity is not slowing down. The Deloitte survey found this 80% of companies and 90% of private equity dealmakers expect an increase in the number of deals, while 81% and 87%, respectively, expected the value of deals to increase.
One of The driving forces, besides the low rates, are artificial intelligenceIt forces companies to rethink and adjust their long-term strategies, Veldjuis said.
This should It does not bode well for investment banks, especially Goldman SachsBecause it’s a bigger part of their business. Goldman Sachs stock is particularly attractive as it trades at just 15 times forward earnings.
